Japan’s CPI data in focus ahead of Yellen FX moves were relatively quiet overnight, as the Asian session was marked by a light news flow and narrow trading ranges in most currency pairs, perhaps because market participants are awaiting for Chair Yellen’s speech at Jackson Hole on Friday. The most noteworthy data release ahead of her speech will be Japan’s CPI for July, due out during the Asian morning Friday. BoJ Governor Kuroda made some very dovish comments recently, indicating that there is “sufficient chance” for the Bank to ease its policy further at its September meeting. Given that these will be the final CPI data prior to that gathering, we believe that they may be one of the determining factors of whether policymakers will indeed push the easing button. No forecast is available for the headline rate, and while the core rate is expected to rise marginally, that would still leave it well within the negative territory. Given also that the trend of both indicators is to the downside, we doubt that any modest improvement will materially push back market expectations for more near-term stimulus by the BoJ. In addition to a flat GDP print for Q2, further softness in the CPIs could add even more pressure on the Bank to act as early as next month and thereby cause JPY to give back some of its August gains.

Today’s highlights: During the European day, Germany’s Ifo survey for August is due out. Both the current conditions and the expectations indices are forecast to have risen somewhat, perhaps buoyed by the calmer than expected market reaction to the “Brexit” vote. This is also supported by the ZEW survey for August, which showed that sentiment among German financial market experts rebounded from its post-referendum dip. This view is also in line with the Bundesbank’s latest monthly report, in which the Bank indicated that Britain’s vote to leave the EU should have limited immediate economic impact on the German economy. An increase in both of these figures may cause the euro to partly recover the slide we saw the last couple of days.

Sweden’s consumer confidence index for July is coming out and expectations are for an increase. The nation’s manufacturing confidence and the unemployment rate, both for July are due out as well, but no forecast is available for neither.

In the US, the Jackson Hole economic symposium begins after the US closing and it will continue to Saturday. Fed Chair Yellen is scheduled to speak tomorrow. As for today’s US indicators, we get durable goods orders for July. Both the headline and the core rates are forecast to have risen after sliding in June. The headline rate is expected to have risen notably more than the core rate (ex. transportation), something supported by a surge in civilian aircraft orders during July. Following the flat retail sales print for July, a robust durable goods report for the month could ease some concerns over the underlying momentum of the US economy and thereby support USD. We also get the preliminary Markit services PMI for August and initial jobless claims for the week that ended August 19th.

On Thursday, U.S. indices closed lower pressured by shares in the Food & Staples Retailing, Health Care Equipment & Services and Consumer Durables & Apparel sectors. The Dow Jones Industrial Average fell 33 points (0.2%) to 18488, the S&P 500 shed 3 points (0.1%) to 2172, while the Nasdaq Composite lost 5 points (0.1%) to close at 5212.
European stocks also retreated with the STOXX Europe 600 down 0.8%. Germany's DAX lost 0.9%, the U.K.'s FTSE dropped 0.3%, and France's CAC was down 0.7%.
Nymex crude oil was up 1.2% to $47.33 a barrel as Saudi Arabia's energy minister saw an output freeze as a "positive".
Gold declined 0.2% to $1,322 an ounce, while silver was flat at $18.55 an ounce. Meanwhile, the benchmark 10-year U.S. Treasury yield climbed to 1.576% from 1.558% in the previous session on strong durable goods report. On the economic data front, initial jobless claims lowered slightly to 261k in the week ended Aug. 20th (estimated 265k) from 262k in the previous week. Continuing claims decreased to 2.15M in week ended Aug. 13th (forecasted 2.16M) compared with 2.18M in prior week. Separately, durable goods orders jumped by 4.4% in July in a preliminary estimate (estimated 3.4%) from a fall of 4.2% in June (revised from -3.9%).

wbrokerforex.com, [26.08.16 17:33]
Yellen’s speech: Market mover or much ado about nothing? Market participants will be on the edge of their seats today in anticipation of Fed Chair Yellen’s speech at the Jackson Hole economic symposium, where she will discuss ‘The Federal Reserve's Monetary Policy Toolkit’. Even though the Fed chief could spend most of her time discussing the implications of a low natural rate of interest and the longer-term future of monetary policy, any comments she makes with regards to the near-term rate path are likely to determine the dollar’s short-term direction. Fed signals regarding the likelihood of a hike this year have been ambiguous lately. The July FOMC minutes had a dovish tilt, showing that most members were skeptical to commit to anything until more data validate a rate move. However, key FOMC officials have made relatively hawkish remarks after the release of the minutes, indicating that September remains a live meeting and that markets are underestimating the possibility of a near-term hike. Given that the majority of the speakers suggested at least one rate hike this year perhaps as early as September, we believe that Yellen is likely to be on the same page. We expect the Fed chief to leave all options on the table by adopting a cautious yet optimistic tone, as has been her usual method of operation in her last few appearances. Any reference to September being a “live” meeting could lead investors to reprice the likelihood of near-term hikes and thereby support the dollar. The market currently prices in roughly a 50% probability of a hike this year, which we still view as overly pessimistic given what the economic environment suggests. The labor market posted stellar gains in June and July, and although GDP growth was lackluster in Q2, the Atlanta Fed “GDPNow” model currently forecasts growth at a robust +3.6% in Q3. Combined with a calmer than anticipated market reaction to “Brexit”, all these factors suggest that a rate increase this year is a very realistic scenario, in our view.

wbrokerforex.com, [26.08.16 17:34]
Japan’s CPIs add pressure on the BoJ to act again Japan’s inflation data showed that consumer prices continued their plunge in July, with both the headline and the core CPI rates staying unchanged well within the negative area. The headline rate held steady at -0.4% yoy while the core rate remained unchanged at -0.5% yoy, missing expectations for an uptick to -0.4% yoy. Coming on top of flat GDP growth in Q2, and following Governor Kuroda’s dovish comments that more easing is a sufficient possibility in September, these soft data are likely to heighten further market expectations for near-term stimulus by the BoJ. We maintain the view that as we approach the September meeting, speculation over what measures the policymakers may introduce is likely to cause the yen to give back some of its August gains.

wbrokerforex.com, [26.08.16 17:34]
As for today’s indicators: During the European day, we get Germany’s Gfk consumer confidence for September, France’s final GDP for Q2, and Eurozone’s M3 money supply for July. However, none of these indicators is usually a major market mover for EUR.
In the UK, the 2nd estimate of Q2 GDP is expected to confirm its initial estimate. GDP growth accelerated unexpectedly in Q2 according to the initial estimate despite any referendum-related uncertainties that may have weighed on economic activity. In any case, given that these data are outdated and GBP did not react at the release of the 1st estimate, we believe that this may be the case for the 2nd estimate as well.
From the US, we get the 2nd estimates of GDP and the core PCE deflator, both for Q2. The forecasts are for these figures to confirm their preliminary estimates. Given that expectations are for unchanged readings and that Chair Yellen’s speech is scheduled less than a couple of hours later, the reaction in USD at these releases could remain somewhat limited, unless we have notable revisions. We also get the final U of M consumer sentiment index for August.